Deadlock: Britain and Europe face Brexit impasse

Both of the options being considered by the government – a customs partnership under which the UK collects tariffs on behalf of the EU or a so-called maximum facilitation arrangement using new technology to avoid delays on the Irish border – have been anonymously branded ‘unworkable’ in Brussels.

Meanwhile, manufacturers’ organisation EEF dismissed the prospect of having max fac up and running by 2020 as ‘naive and wholly unrealistic’ and called on ministers to ditch it.

In a letter to business secretary Greg Clark, EEF chief executive Stephen Phipson said experience on the US-Canadian border showed that max fac – which is backed by foreign secretary Boris Johnson – is ‘a non-starter’ which risks creating tailbacks from London to Paris.

The decision would have ‘economic consequences for thousands of British businesses and real financial implications for the millions of people who work for them’, said Phipson.

‘We have an absolute responsibility to highlight fundamental flaws in one of the options that still remains under serious consideration. I hope that the government now recognises that one of these options is simply not credible.’

Theresa May’s official spokesman acknowledged ‘there is more work to be done’ on both option, and declined to say when the prime minister’s Brexit war cabinet would come to a conclusion.

Asked how the PM responded to suggestions that the UK was indulging in fantasies about the outcomes it might achieve, the spokesman responded: ‘As the Brexit secretary said last week, we need to approach these discussions with the interests of our citizens at heart.

‘That means focusing on holding constructive talks inside the negotiation room. We also need to be constructive outside the room, which means looking beyond soundbites and negative anonymous briefings.’

The PM’s spokesman played down the significance of an invitation offered by the 27 remaining EU states for the UK to take part in discussions on the bloc’s £1 trillion budget for the next multi-annual financial framework (MFF) period, for 2020-27.

The UK was ready to talk about future financial contributions to individual programmes, including some relating to science and security, but the overall budget was for the EU27 to discuss, he said.

‘Negotiations on the next MFF are primarily a matter for the 27 remaining member states, but there are a number of areas where it will be in the UK’s and Europe’s mutual interest to have engagement, such as on issues relating to the design of the next framework and its programmes,’ said May’s spokesman.

‘The PM has been clear that we will want to continue working together in ways which promote long-term economic development and the security of our continent, including participating in EU programmes where it is in our interest.’

Leading backbench Brexiteer Jacob Rees-Mogg warned against UK involvement in discussions on the MFF, telling LBC radio: ‘If you are in the discussions, is there a risk that you begin to take responsibility for decisions and then you find that you get a bill at the end of it?’

Meanwhile, the Treasury sought to play down the scale of reported differences with the Bank of England over post-Brexit regulations.

The Financial Times reported that tensions have been sparked by the EU’s rejection of a ‘mutual recognition plan’ which would have given the Bank autonomous control of regulations in the City of London.

The Bank reportedly opposed a Treasury compromise which would keep UK controls closely aligned to Brussels, but leave Threadneedle Street a ‘rule taker’.

A Treasury spokesman said: ‘HM Treasury and the Bank of England are united in our aim to ensure the stability and prosperity of our economy, and we are working together to ensure that the UK continues to remain the pre-eminent financial services centre of the world.

‘We agree the United Kingdom cannot be an automatic ‘rule taker’. We will start our first day outside the European Union from a unique position with full alignment.’